The Sting in Honey Prices

US honey prices have been rising steadily and significantly over the past couple of years, up 4% year-on-year and 50% higher compared to 2008 prices. Declining US production has resulted in supplies becoming increasingly scarce, and for the 2013 season US demand for imports is expected to reach its highest level ever.

The rise in honey prices stems from the drastic decline in bee populations in 2006. This reduction in bee numbers was later called colony collapse disorder, and it has affected the health of bee colonies ever since. Now that spring is approaching, beekeepers all across the US are returning to their hives to examine the health of the bee colonies. Initial reports state that the unusually cold winter weather in some parts of the US has led to large losses in those regions, with some beekeepers in New England reporting losses of up to 80%. Losses across the US as a whole are expected to be a more manageable 10-20%.

But it is not just declining bee numbers that are harming honey production. Due to rising prices for agricultural commodities such as grains, many farmers are reported to be using their land more intensively to increase the production of corn and other crops. This has reduced forage areas available to bees, consequently resulting in lower honey production, especially for certain types such as white honey and light amber honey.

As domestic supply falls, US honey imports will increase in 2013. However, the decrease in production across the globe means that competition in the international market is heating up.

Demand from Australia, normally a significant exporter of honey, is strengthening as the dry summer in Southern Australia harmed food sources for bees, and floods in Queensland led to the destruction of large numbers of hives. Australian supply will be very tight, so not only will import demand rise, but exports are forecast to drop sharply. Elsewhere, demand from China continues to mount, along with demand from Europe and Canada. Production in South America, especially Argentina and Brazil, is expected to have risen slightly, 1% year-on-year. This slight increase in production, however, is not going to offset the losses in the US and Australia, meaning that prices are likely to increase worldwide.

Nevertheless, the lifting of high import duties on foreign honey is good news for US buyers. With the dollar growing stronger against the Euro and some other currencies, the US is a much more attractive market for foreign sellers than it was a year ago. An increasing amount of honey is expected to be sent to the US this year, rather than to Europe or the other traditional markets.

Honey prices are expected to continue climbing in 2013, supported by strong global demand and a drop in production and supply, though the real sting from falling bee numbers is not just rising honey prices. Vast arrays of agricultural crops such as almonds and soy rely heavily on bees for pollination, and as bee numbers decline, we should anticipate a negative effect on these other commodities.